I’ve long maintained that President Obama’s statement on health care reform that “If you like your coverage and your doctor, you can keep it,” was naïve at best and an outright lie at worst. As the reform debate has dragged on this year, it’s become more and more clear that when it’s all said and done, change will be the order of the day for all of us – benefits levels, benefit costs and yes, our individual plans and physicians.
Although the administration is keeping up the “like it, keep it” mantra, new survey results from Mercer put fresh cracks in the façade. The consulting firm reports 63% of employers would cut health benefits to avoid paying an excise tax included in the Senate bill introduced last month. Mercer estimates that one in five employers offer health coverage generous enough to be subject to the bill’s 40% non-deductible tax on the excess value – tagged as costs above $8,500 for employee-only coverage or $23,000 for family coverage, starting in 2013.
In all cases, annual costs include employer-paid, employee-paid, pretax and post-tax premium or premium-equivalent amounts for the health, dental and vision coverage. Annual expenses also include pretax (not post-tax) contributions to FSAs, and employer contributions to HSAs and HRAs.
The percent of employers impacted by the cap would increase annually, because the bill proposes that the baseline trend be inflated by the annual consumer price index (CPI) plus 1%. Says Linda Havlin, a Mercer worldwide partner: “For many employers, it’s a matter of when, not if, they will hit the cap.”
And when they do, employers are leaving no room for doubt that even if employees like the coverage they have, they surely will not keep it. In addition to the nearly two-thirds of employers that would cut covered benefits to avoid paying the excise tax, Mercer finds 23% would maintain their current plan, but pass along the cost of the tax to their employees. Just 2% would keep their plan, but absorb the new tax themselves. And 7% would terminate their plan altogether. Notably, 9% of small employers – which typically offer only one medical plan choice – say they would terminate their plans, potentially forcing their employees into the individual market.
Of those employers that would reduce covered benefits, 75% would raise deductibles and copays, while 40% would add a low-cost plan as an alternative and 32% would just make a low-cost plan their only benefit option. However, some larger employers would look to more progressive strategies, like the one-quarter of companies that say they would seek quality and cost-efficiency improvements through high-performance networks, medical homes, and health management incentives.
No matter the response, though, Havlin is blunt that most of the burden to deal with the cost of reform will fall on employers. “For example, employers will likely bear the brunt of the government’s $156 billion fees on insurers, manufacturers, hospitals and other suppliers – and they will pass the cost on to employees.”
And employees will be even more disgruntled when they hear this: One argument in favor of the excise tax is that employers cutting benefits would return the savings to employees with higher wages. However, just 16% say they would convert cost savings into higher pay.
Not quite what you promised, Mr. President.
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